For-Profit Schools Can Cost $466 More Per Credit -- But Rarely Pay Off

For-profit colleges are making a comeback — and that’s not a good thing.

The Obama administration was tough on for-profit schools, but its progress toward transparency and stronger protections for students could be rolled back. Top officials of the new presidential administration have directly benefited from for-profit universities, reports The New York Times. President Trump himself ran the for-profit Trump University.

For-profit colleges are private higher-education institutions that make a buck off of students’ desires to better themselves. They’re run by businesses, so the goal is to generate a profit.

And while the costs of for-profit schools are often much higher than tuition prices at public colleges, these higher costs aren’t matched by better outcomes. The promised return on investment for these colleges doesn’t materialize for many for-profit attendees.

Take four-year schools, for example. For in-state residents, the average cost-per-credit at a public, four-year college is $325. The same credits earned at a for-profit college, however, cost nearly twice as much: $647, on average.

That means for-profit college students pay $38,640 more for a 120-credit-hour undergraduate degree than their counterparts at public colleges.

The differences are even starker at two-year schools. Credit costs at two-year, public colleges are much cheaper than four-year public colleges, averaging $190 less per credit.

But two-year, for-profit schools cost about the same as four-year, for-profit colleges at $601 per credit versus $647, respectively. And compared to public, two-year colleges, they are an obviously costly option — charging $466 more per credit.

Those per-credit costs add up fast. A two-year associate’s degree of 60 credits costs $8,100 at the average community college, but a similar degree would cost 4.5 times as much at a for-profit college.

With an average cost of $36,060 for 60 credits at a two-year, for-profit school, you could pay $27,960 more for the same degree or certification.

For-Profit College Students Borrow More

Since for-profit students pay 2-4 times more for their educations, it’s no surprise they end up with more student loans.

Graduates of for-profit colleges are the most likely to have student loans, with 88 percent holding educational debt. Compare that to just 66 percent of public college graduates with student loan debt.

For-profit college graduates also leave school with higher student loan balances, averaging $39,950 for four-year degrees. That’s $14,400 more than the average balance of public college graduates. Even graduates of private colleges, which have higher costs per credit than for-profit schools, leave with less student debt, averaging $32,300.

For-Profit Colleges Offer Little Institutional Aid

The student bodies of for-profit colleges also tend to be low-income and disadvantaged. These colleges enroll a disproportionately high number of low-income students, who are least able to afford the higher costs.

Even worse, for-profit schools “offer very little institutional aid,” according to a report from the Public Policy Institute of California. Instead of school-sponsored scholarships and grants, for-profit college students have to depend on federal aid — mostly student loans — to cover their costs.

Because for-profit colleges “provide virtually no institutional grant aid,” the report explains, “they are the most expensive in terms of net price.”

Even private, not-for-profit colleges have lower net prices. This is especially true for low-income students likely to qualify for significant institutional aid.

A recent paper from the National Bureau of Economic Research found that a for-profit degree actually lowered graduate’s earnings. “On average associate’s and bachelor’s degree students experience a decline in earnings after attendance, relative to their own earnings in years prior to attendance.”

In January, the Department of Education identified 800 schools that did not meet landmark Gainful Employment regulations, which track students’ job placements and earnings. Of those 800 colleges, 98 percent were for-profit institutions.

“There are a significant number of career training programs — specifically for-profit programs — that do not provide their graduates with a reasonable return on investment,” according to the Department of Education statement.

Graduates Struggle With Student Loans

These poor employment opportunities and little-to-negative income growth create serious financial burdens for graduates. New grads have to scrape together enough monthly cash to cover their new student loan payments on a stagnant income.

It’s no wonder that for-profit graduates and college dropouts are among the most likely to default on student loans. Non-traditional borrowers, primarily those attending for-profit schools, make up 50 percent of student loan borrowers yet account for 70 percent of defaults, found a 2015 paper from The Brookings Institution.

Is college worth it? Only when the ROI is there. Through Student Loan Hero, I see the crushing weight that student debt can have on borrowers; I had to face my own student debt of $107,000. But unlike many for-profit students, my college career helped lead me to the success and income to afford my loans.

With for-profit schools poised for a comeback, it’s more important than ever for students to know the reality of the situation. Behind the slick advertising and marketing campaigns of for-profit schools is a rotten deal that’s likely to leave you in debt or default.

Students can’t afford to make the mistake of attending a for-profit college. Take the time to research your options and make a choice that will get you into the career (and salary) you’re hoping for.